...fanned by the Performance Artist in Chief...
THINGS are moving along quickly...like a piece of trash in a fast-moving stream, writes Bill Bonner, reporting from Ireland for his Diary of a Rogue Economist.
At the beginning of last week, investors were worrying about an intensifying trade war. By its end, they thought they heard the "all clear" and convinced themselves that stifling trade either won't happen or won't matter.
Of course, we agreed with them, predicting that The Donald would never go "Full Retard" in the trade war.
Unless he can pin the next bear market/recession on the Fed, he will suffer more than anyone. His career, his reputation, and his private fortune – all could go downstream in a downturn.
But now that investors have gotten on board with our point of view, we disembark. Because we're beginning to wonder:
What if the trade war is real, and not merely part of the President's performance art?
What if he really is foolish enough to risk a major market selloff? And what if his rise to power was not just a fluke, after all, but a signal of a deep, megapolitical shift?
We use that awkward word – "megapolitical" – to describe events and trends that are so big, we don't see them...and so powerful, we can't control or direct them. Nobody votes on a megapolitical trend; and very few people see it coming.
As we pointed out yesterday, the US had a nice run, with the largest free-trade zone in the world, the freest markets, and the freest people.
They even "swung their arms more freely" when they walked, noticed French sociologist and political theorist Alexis de Tocqueville. That is what made America great, we believe.
The feds contributed, too – mostly by staying out of the way, leaving people to make their own beds...and lie in them. All wealth comes from win-win deals. The people who make the most of them are the winners.
But the win-win deal is only appropriate in a win-win, positive-sum world.
The world of 4,000 years ago was mostly a win-lose, zero-sum world. You couldn't invest, invent, or innovate to make the pie bigger. If you wanted more, you had to take a piece from someone else.
Today, if you can only get ahead by taking something from someone else, you are either a crook, the government, or you're in a zero-sum economy.
An ancient, zero-sum world was on display in Poland last week, as archeologists revealed a major find. Tech news website Ars Technica reports:
"Sometime between 2880 and 2776 BCE, 15 family members were hastily buried together in a single pit, their shattered skulls telling a story of violent death.
"We know from ethnographic and historical sources that cattle raiding and other forms of livestock theft is very common cross-culturally in pastoral societies," study co-author Niels Nørkjær Johannsen of Aarhus University told Ars.
"We have every reason to believe that competing communities during this period would have taken another (unrelated) group's livestock if they got the chance, and would sometimes pursue this as a systematic strategy."
Sometimes raiders just wanted to swipe a few cattle; other times they wanted to weaken or wipe out a rival group.
That might mean killing the men of fighting age and kidnapping the women and children, or it might mean wiping whole communities off the map.
In this case, the raiders apparently considered wholesale slaughter more expedient than taking prisoners.
In the late 20th century, wholesale slaughter was unacceptable to most people. Still, the American heartland began to resemble a zero-sum game.
Real US GDP growth rates – in most of the country – fell to medieval levels, barely positive at all.
After 1975, the average person did not get a significant pay raise.
But the cost of living continued to rise. By the 21st century, the typical man had to work twice as long to buy an average house and an average car as he did in 1975.
Since the hours of the day could not be increased, he could only plausibly keep up by borrowing time from the future (going into debt).
Now, including corporate, private, and government debt, he will schlep, sweat, and tote for seven years to pay off his share...or, at 4% interest, from January to April every year – just to pay the interest!
Zero-sum games – wars, duels, and robberies – have winners...and losers. The average American clearly wasn't among the winners, so he must be one of the losers, which, of course, he was.
As the years went on, "financialization" meant that more and more wealth went to the financialized classes.
The winners were the rich, the elite, and the insiders, who watched their assets, bonuses, and stock options soar. As we saw yesterday, after 1987, stocks went up three times faster than GDP.
Relatively, the rich got richer and the poor and middle classes lost ground. And by the 21st century, practically 100% of all new wealth created went into the pockets of the top 10%.
Who bothers to think through how it came to be? Who bothers to follow the trail...from the post-1971 fake money...to the post-1987 Greenspan Put...to the post-2008 quantitative easing (QE) and negative real rates...to the Uber IPO...and the steady loss of real, breadwinner jobs throughout the 21st century?
Politics demands basic plots...ones the masses can follow. Good guys versus bad guys. Us versus them.
Besides, Americans were growing old and tired. Who wanted to compete? Instead, they wanted tariffs, walls, and warships to protect them.
To most people, it was simple. The US economy had become a win-lose, zero-sum game...and they were losing. Is it any wonder that they began to think that win-lose deals...with a win-lose leader...were the only way to play?
And now, America's "light unto the world" has become like a wreckers' bonfire. It lures ships onto the rocks...especially the USA itself.